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A Corporate (Crime) State

 

What Business Week magazine calls “the corporate crime wave” shows every sign of worsening, as more major corporations scramble to admit massive deception of investors, looting of pension funds, self-enrichment of top executives, restatement of earnings and giant farewell compensations packages to departing bosses who wrecked their companies to further their own megagreed.

So much of these corporate cesspools are oozing into the public’s view that it is difficult to piece them into an understandable reform movement for workers, consumers and investors to support. The sanitation trucks can’t begin to keep up with the spilling garbage of betrayed trust, pillage and plunder of trillions of dollars.

“Is Wall Street Corrupt” headlined Business Week? Inside the reporters showed the answer to be yes, yes, yes! The founder of the giant Vanguard Mutual Fund, John C. Bogle, declared “Our capitalistic system is in peril,” and just started a shareholder-rights group with Warren E. Buffett. What communism could not do, the big business bosses are doing to the market system and the financial industry.

We are witnessing the corporate destruction of capitalism in favor of a corporate state. The law can’t save it because the laws are controlled by politicians many of whom are controlled in turn by these same business interests and campaign cash. For every honest Congressman Henry Waxman and Senator Paul Sarbanes, there are scores of Congressional and White House politicians huddling with business lobbyists to stifle prosecutions, reforms and investigations.

The lead culprit is the retiring and shameless Senator Phil Gramm (Rep. Texas) whose wife just resigned from the Enron Board and its audit committee. On May 16th, he met with 30 corporate lobbyists to plan the surrender of Washington, D.C.’s national government against the crookery of Wall Street.

In American history, reforms usually followed scandals. Now over the past twenty years, scandals follow scandals because there are no reforms.

Sometimes the Congressional reaction is to weaken the existing laws and safeguards against corporate crime, fraud and abuse a even after imposing massive taxpayer bailouts of the culpable industries. Remember the S&L scandals that are costing taxpayers half a trillion dollars in principal and interest between 1990 and 2020.

Conflicts of interest are at epidemic levels in Wall Street and trust is being destroyed a the key confidence that investors must have in information and advice directed their way. A devastating new report a that has received little notice a by the only major non-conflicted ratings firm left in the country (Weiss Ratings, Inc. from Palm Beach Gardens, Florida) concludes:

1. “A deeper understanding of the crisis can be achieved through an analysis of “buy,” “sell,” and “hold” ratings issued to companies that went bankrupt in 2002: A total of 50 investment banking and brokerage firms issued ratings to 19 companies that filed for chapter 11 in the first four months of 2002…. 94% of the 50 firms continued to indicate that investors should buy or hold shares in failing companies right up to the day these companies filed for bankruptcy. Among the 19 bankrupt companies, 12 continued to receive strictly “buy” or “hold” rating on the date of bankruptcy filing.”

Weiss Ratings receives no financial compensation from the companies it rates, unlike S&P, Moodys, and Duff & Phelps. Here are its unbiased ratings. “Among the 20 largest brokerage firms, 13 may be financially vulnerable if their finances deteriorate further, while seven have the financial wherewithal to withstand a severely adverse business environment.”

Weiss Ratings gives low grades to JP Morgan Chase & Co, Lehman Brothers, Merrill Lynch, UBS Warburg LLC, Barclays Capital, Credit Suisse First Boston Corp. These firms have millions of customers who relied on their highly self-advertised, objective expertise. (For more details see http://www.weissratings.com)

There needs to be an aroused public to take control of their government and direct their public servants, before the November elections, to enact systemic action for reform, not phony legislation that allows crooked business as usual. For suggestions on what these reforms can be, log on to http://www.citizenworks.org

Ralph Nader is the author of Crashing the Party.

 

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Ralph Nader is a consumer advocate, lawyer and author of Only the Super-Rich Can Save Us! 

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